More than 140,000 small businesses have accounts closed by major lenders, figures show

More than 140,000 small businesses have been de-banked by major lenders in the past year, according to a report by MPs.

Some 2.7 per cent of the 5.3 million business accounts held by small businesses were closed by banks, according to the Treasury Committee.

The data – based on figures from Barclays, HSBC, TSB, Lloyds, Santander, NatWest, Metro and Handelsbanken – has prompted scrutiny over how lenders take decisions to close accounts.

The reasons currently given by lenders for closing the accounts included risk appetite, financial crime concerns and lack of information-sharing.

Debanking was thrust into the spotlight last summer after private Coutts closed Nigel Farage’s account, prompting concern it was happening to other individuals and businesses.

This is Money revealed how charities, choirs and small community groups were also being debanked.

Harriett Baldwin, chair of the Treasury Committee, said that the readiness of lenders to close accounts with little or no notice was ‘startling’.

‘Our Committee believes that any company engaged in a legal business activity in the UK should be able to find a bank to offer them a bank account.

‘The fact that only three lenders included risk appetite in their criteria indicates these discussions may not be systematically recorded – leaving questions over whether decisions on the debanking of certain businesses, based on what banks perceive as a risk, are happening informally.

‘I hope publishing this data can aid scrutiny of the decisions taken by banks and help to ensure legitimate businesses are not being unfairly treated.’

The figures come as the Economic Secretary to the Treasury, Bim Afolami, is set to appear in front of the Treasury Committee later today.

He is likely to be questioned on whether he believes small businesses are receiving a fair deal.

Small businesses have raised concerns over the lack of access to finance with nearly half resorting to a personal credit card to fund their business.

In the third quarter of 2023, gross lending was down by a fifth with SMEs relying on personal savings to see them through, according to Shawbrook.